McDonald's Operations Efficiency - Case Study Example

Operation Analysis Introduction The purpose of this paper is to analyse the operation of a restaurant operating in the UK as well as in the world. The proponent chose to analyse McDonald’s because this food chain restaurant operates not just in the UK but in the world. In particular, the proponent includes in the analysis the two operational measures that will help manage McDonald’s operation effectively. These two important measures of operational performance are relevant in order to control and enhance its operation. Thus, the proponent emphasises the two chosen measures of operational performance for McDonald’s by explaining their importance and their capacity to help manage McDonald’s operation effectively. Company Background The company is an international icon as the leading fast food chain restaurant operating in an international coverage. Thus, it is important to learn a little background about this company as far as global foodservice retailing and performance evaluation measures are concerned. There were 22 million people worldwide served by McDonald’s in 1994 (Lyon et al., 1994). This figure rose more than twice which correspondingly one of the most important bases why McDonald’s declares to be the leading global foodservice retailer (McDonald’s, 2011). McDonald’s does not only cater to the needs of the consumers, as well as its franchisers. The reason why McDonald’s continues to flaunt its achievements is to entice international franchisers in order to continuously help the brand grow for the better. Today, there are more than 32,000 McDonald’s local restaurants in 117 countries which approximately cater around 60 million people. This alone is enough to entice local business persons to go for foodservice retailing through McDonald’s franchising. At present, 75% of McDonald’s restaurants are globally owned or operated by local business people. Among of the world’s favourites at McDonald’s are its world famous fries, big mac, quarter pounder, chicken mcnuggets, and egg mcmuffin. Ray Kroc, founder of McDonald’s had established a good foundation for the company. He was successful in passing on the vision from generation to generation. This makes McDonald’s one of the best companies that can remarkably give important insights on how a business should function according to the basic business principles and even in areas of complicated situations. McDonald’s without question is good at establishing both its internal and external control. This paves way to probable interrelated relationship between the company’s management control system and its strategies (Kober et al., 2007). In every business, control is important because it paves way to strategic management system (Nilsson and Olve, 2001). It is in this reason that control has become one of the most important options in business operation in order to evaluate existing strategies prior to the achievement of corporate goals. It is in line with this that performance measurement and management control have become strongly related with each other prior to effectively enhancing efficient business operation (Epstein, 2004). Measures of Performance – McDonald’s The main content of this paper includes two general performance measures that can be applied in an organisation. Particularly, the proponent includes financial perspective and customer perspective as two general performance measures that can be applied at McDonald’s. These two measures are essential perspectives of the balanced scorecard as a set of performance measures from the company’s strategies in order to support its strategy and generally its operation in the long run (Garrison and Noreen, 2000). Financial Performance Measure In the midst of tough competition most firms are apt to stimulate needs for their service or product offerings (Kotler et al., 1999; Boone and Kurtz, 2006). This is eventually relevant in the case of McDonald’s. The current market trend demands for more healthy foods which eventually tries to ward off consumers from accepting product offerings from McDonald’s. However, in order to maintain higher level of revenue amidst the existing market trend in the food retailing industry, McDonald’s was able to come up with product offerings that are having less content in fats and calories. This triggers wide market response considering that McDonald’s has established its name long way enough. The efficiency of its innovative response for the changing market trends and consumer behaviours is therefore evident on its financial performance. In fact, the higher the revenue for its new innovative products signals wide market acceptance. Thus, this enhances its strategic option to continue looking for more innovative products that go well with consumers’ current needs. In most business, financial performance is at the top priority because it is constantly monitored for its improvement (Garrison and Noreen, 2000). The business cannot sustain without balanced and highly improved financial performance. Financial measures therefore are considered by most organisations as the basic tool for measuring and controlling their performance (Daft and Marcic, 2010). In reality, business cannot perform well without sufficient funds. Cash flows have to be liquid in order to address relevant financial considerations. In the case of McDonald’s there is a remarkable amount of inventory that needs to be transformed as cash in order to sustain its business operation and address other related financial obligations of the firm. In short, sales have to increase or even target revenue has to be achieved in order to have sufficient funds for the business. It is not healthy for the business to rely on its financing activities on debts and equity. There has to be relevant amount converted from inventory to cash. This can only be measured by monitoring revenue, net profit and other related financial information that can adequately explain how well the financial performance of the company is going. The bottom line is to keep the financial performance improved for the better. It is not easy to achieve this considering the tough competition and existing new market entrants. McDonald’s have other competitors that can relatively offer good alternatives for its product offerings. This in reality will reduce financial performance considering that the market share will significantly change as far as consumers’ preference is concerned. As can be noticed, financial performance can say more than just the actual figure or amount of cash. It also paves way to understanding better alternatives and options in order to improve operation. Financial performance is just the bottom line, but the thought of knowing it exposes other relevant information on how to improve operation. In the case of McDonald’s with tough competition in the global foodservice retailing industry, financial performance can say something better about market share or customer acceptance of new and innovative service and product offerings. Customer Performance Measure Performance measures when it comes to customer perspective are diverse and it depends entirely on the company which areas it needs to give more concentrated attention. The bottom line of this performance measure is for the firm to find out if customers are able to identify the value it delivers (Garrison and Noreen, 2000). The more value it delivers the better. Thus, it is important to conduct customer satisfaction as measured through surveys. It is also important to know customer complaints. In most cases, especially in line with marketing activities, market share has to be determined. It is therefore clear that there are different performance measures under customer perspective and they all depend on which areas a company needs more improvement in delivering its services and value. These measures, particularly customer performance measure allows the company to evaluate how far and at what point does it need more improvement in delivering its value to the customers. Thus, this gives important actions that need to be implemented (Parmenter, 2011). Conclusion There are different performance measures, but in the case of tough competition, it is important to give meaningful priority for financial and customer performance measures. This is to ensure that other important activities such as marketing will be determined to effectively enhance operation and ensure competitive advantage. References Boone, L. E., and Kurtz, D. L. (2006) Contemporary Marketing. 12th ed. USA: South-Western. Daft, R., and Marcic, D. (2010) Understanding Management. Ohio: Cengage Learning. Epstein, M. J. (2004) Performance measurement and management control: superior organization performance. Amsterdam: Emerald Group Publishing. Garrison, R. H., and Noreen, E. W. (2000) Managerial Accounting. 9th ed. Toronto: Irwin/McGraw-Hill. Kober, R., Ng, J., and Paul, B. J. (2007) ‘The interrelationship between management control mechanism and strategy.’ Management Accounting Research, Vol. 18 (4): 425-452. Kotler, P., Armstrong, G., Saunders, J., and Wong, V. (1999) Principles of Marketing. 2nd ed. England: Prentice Hall. Lyon, P., Taylor, S., and Smith, S. (1994) ‘McDonaldization: A reply to Ritzer’s thesis.’ International Journal of Hospitality Management, Vol. 13(2): 95-99. McDonald’s (2011) ‘Getting to know us.’ [Online] Available at http://www.aboutmcdonalds.com/mcd/our_company.html (Accessed: 2 May 2011). Nilsson, F., and Olve, N. (2001) ‘Control systems in multibusiness companies: from performance management to strategic management.’ European Management Journal, Vol. 19 (4): 344-358. Parmenter, D. (2011) Key Performance Indicators: Developing, implementing and using Winning KPIs. New Jersey: Wiley and Sons. Read More